EU BMR update just on time; I did not see it!

BMR update has been published on 27 November 2019; its main effect that were to take effect one month later have been delayed by 2 years. The full text is available on EUR-lex: https://eur-lex.europa.eu/eli/reg/2019/2089/oj

The natural question here is: Marc, have you been asleep since 27 November that you did not notice this very important piece of legislation being published? The answer is: Yes, I have been asleep part of the time, usually at night. Actually I had read the title of that piece of legislation but I deemed it to be of no importance for interest rate benchmark transition. As a (weak) defense to my failure to see the significance of this piece of legislation, I will only present the title of the document published on the Official Journal of the European Union: REGULATION [...] amending Regulation (EU) 2016/1011 as regards EU Climate Transition Benchmarks, EU Paris-aligned Benchmarks and sustainability-related disclosures for benchmarks.

Yes you read that correctly. A major change on critical interest rate benchmark is hidden there, behind climate related benchmark items. Actually it is under the point (25) out of 26 of the "whereas".

Now that I know where to look at it, I can report on it.

The relevant amendments are the (4), (5) and (9).

Amendment (4) and (5) includes "The maximum period of mandatory administration shall not exceed five years"  and "The maximum period of mandatory contribution under points (a) and (b) of the first subparagraph shall not exceed five years". 
So if regulators decide that EURIBOR has to be continued, they (the Belgian FSMA in the EURIBOR case) can ask it to continue for up to 5 years. That makes the discontinuation of EURIBOR before 2027 quite unlikely.

Amendment (9) includes "An index provider may continue to provide an existing benchmark that has been recognised as a critical benchmark [...] until 31 December 2021" and "An existing benchmark that has been recognised as a critical benchmark [...] may be used for existing and new financial instruments, financial contracts, or for measuring the performance of an investment fund until 31 December 2021". Which means that we have two more years to see the real impacts of BMR.

To my knowledge, the current critical benchmarks (with their administrators) are (Official Journal of the European Union - L 82/26 - 25.3.2019):
  • EURIBOR (EMMI)
  • EONIA (EMMI)
  • LIBOR (IBA)
  • STIBOR (Svenska Bankföreningen)
  • WIBOR (GPW Benchmarks S.A.)
The following administrator of above benchmarks are registered with ESMA (Name - autorisation - supervisor)
  • EMMI  - Authorisation under Art. 34 - Financial Services and Markets Authority (FSMA)
  • IBA - Authorisation under Art. 34 - Financial Conduct Authority (FCA)
  • GPW Benchmarks S.A. - Authorisation under Art. 34 - Polish Financial Supervisory Commission
The following administrators of non-critical benchmarks have registered recently (benchmark - administrator - Supervisor - Registration date)
  • CIBOR - DFBF - Danish financial regulator, Finanstilsynet - 12 December 2019
  • NIBOR - NoRe (Norkse Finansielle Referanser AS) - Norwegian Financial Supervisory Authority/Finanstilsynet - 12 December 2019




Comments

Post a Comment

Popular posts from this blog

Multi-curve framework book: new edition in progress

Image
Subject: Interest Rate Modelling in the Multi-curve Framework: Foundations, Evolution, and Implementation It has been more than 10 years since I wrote the first edition of the multi-curve framework book. What happened in those 10 years? Why did it take me so long to start a new version? It took me roughly 10 years to write the first edition. The reason it took so long at that time, was that I did not know that I was writing it! I thought I was writing a couple of pages on an obscured and theoretical idea that there was not a `` one curve to rule them all '' but multiple curves. It turned out that it became the actual practice for very clear and important reasons. That was the excuse for the first edition, what is the excuse for the second edition? Since the first edition, many things happen, in particular: March 2015: BCBS - IOSCO: margin requirements for non-centrally cleared derivatives and mandatory variation margin July 2017: The future of LIBOR -- actually it
Read more

Rigged: part 1 - Will there be a part 2?

Image
I have been reading book “Rigged: The Incredible True Story of the Whistleblowers Jailed after Exposing the Rotten Heart of the Financial” (Andy Verity, Flint, June 2023) for some time. It was published several month ago, but I just finished it. To my defence, I have to say that I don’t feel comfortable reading fiction where the “bad guys” are systematically winning by cheating. The book is the story of the miscarriage of justice done in the LIBOR manipulation story. The book content did not surprise me. For anybody having worked on a (swap) trading desk, it is clear that what was described by the accusation was impossible. It is not possible for some middle level trader to create a multi-year, multi-desk, multi-bank international conspiracy over open lines, broker lines, on open offices etc. without all around them, including compliance and senior management to be fully aware of what is going on. Moreover the regulators cannot be ignorant of the situation, except pleading complete in
Read more

A personal statement on the IOSCO Statement on Alternatives to USD Libor

IOSCO has issued a document called “Principles for Financial Benchmarks” in 2013. As such it acted as an (unofficial/unelected) lawmaker. On 3 July 2023, the same IOSCO issued a “ Statement on Alternatives to USD Libor ”. The Statement looks like a tribunal judgement from a trial with no public hearing, no witness, and no defense right from a tribunal with no mandate to judge. And publish on the day before Independence Day! Some personal comments on the document. Transparency The statement indicated “Administrators should consider whether to improve the transparency of their rates". The IOSCO document lack minimum transparency. It does not indicate in any way the “varying degrees of vulnerability of concern“ of the analysed benchmarks. The name of the benchmark are not even indicated. This creates a culpability by association to all non-SOFR benchmarks. The statement refers to a Review of Alternatives to USD Libor ; to my knowledge, the review itself is not available. The st
Read more